Running Open Challenges to Solve Problems

May 4, 2015
LinkedInTwitterFacebookEmail is only the latest company to expose a problem it is grappling with and ask for outside help. Its Picking Challenge, wrapping up this month, invites participants to design robots and accompanying control software that can grab products from a shelf and place them into a box. Success would help Amazon drive down costs and increase efficiency in its distribution centers around the world.

Companies like Netflix, GE, and Philips have run similar challenges in recent years. But why aren’t we seeing many other Fortune 500 companies follow suit?

Harvard Business School professor Karim Lakhani says that the biggest barrier may be that internal company “experts” don’t believe that “some kid in Indonesia will solve a hard problem they have been struggling with” — and they don’t want to be proven wrong. Lakhani says that today, there is much more supply of academic and entrepreneurial brainpower willing to pitch in on challenges than there is “demand” of companies asking for help. (Well worth a read is Lakhani’s 2013 article on “Using Open Innovation to Identify the Best Ideas.”)

Venture capitalist and InnoLead member Amiel Kornel provides more perspective below on the “inhibitors” to crowdsourcing that must be addressed in large organizations; Kornel has served on the board of InnoCentive, a company that hosts challenges, since 2005.

For nearly 15 years, prize-based crowdsourcing has captured the imagination of innovation mavens and inspired much experimentation. What’s not to like about rallying minds around the world to work on your organization’s challenges? And doing it in a way that transfers much of the risk of failure to people competing for prizes!

Innovation leaders and their CxO peers fully appreciate the potential advantages. Companies like IBM, Netflix, and Amazon have been championing home-grown competitions, some directed at their employees and others at outsiders. Companies like Eli Lilly, Syngenta, P&G, Disney, and Google (as well as non-profits and government agencies like NASA) have turned to commercial platforms offered by InnoCentive, X-Prize, and other intermediaries. Success stories abound.

Nonetheless, prize-based crowdsourcing has largely failed to move from “trial” to “adoption” at most large corporations. Why? In addition to serving on the InnoCentive board since its spin-out from Lilly, I’ve advised more than a dozen Global 500 companies on their innovation strategies. Here are some observations about inhibitors:

  • Ease of adoption: While corporate execs are sold on the merits, mobilizing the rank and file in R&D, product management, marketing, and manufacturing to formulate challenges and curate submissions has proven tough. The required effort can be time-consuming, adding to employees’ workload rather than making their lives easier.
  • Budgeting: Since it’s still considered experimental, innovation leaders often fail to set aside annual budgets for crowdsourcing. That can make the challenge a “one-time-only” phenomenon, even though running them regularly would build more buzz, attract more entrants, and grease the gears internally to take advantage of the solutions that are generated.
  • Desire for a “quick hit.” Related to that, companies can sometimes run a challenge for the marketing impact, as something that is “cool” and “leading edge,” without committing more deeply and strategically.
  • Incentives: Compensation systems and MBO’s generally perpetuate a cultural bias towards solving problems internally rather than asking outsiders to uncover solutions. We still seem to value contributors who can deliver adequate answers more than those who can formulate great questions, even though creativity relies more on the latter than the former. Satisficing — settling for the “good enough” solution — remains the rule at most large organizations.
  • Innovation workflow management: As often happens in a new market category, early commercial solutions haven’t yet nailed the overall value prop. (Think MP3 players pre-iPod.) First of all, they need to reach beyond the transactional. The corporate user’s work is not over when a prize is awarded. Like pieces of a jig-saw puzzle, crowdsourced innovations must connect seamlessly with other work being done internally for the same project.
  • Talent management: Most importantly in my view, the crowd needs to be actively and thoughtfully managed as a “prized” asset, not just invited to compete for prizes when it is convenient. Corporations are used to managing relationships with employees, consultants, partners, and customers. But they have yet to figure out how best to manage their “crowd.”

Do you have other thoughts on how to address these issues? Post a comment below…

Amiel Kornel is Senior Managing Director, Spencer Trask & Co.